SHARETIPSINFO >>Research Reports >> Astral polytechnik Ltd (07-10-2009)

COMPANY OVERVIEW:
Company was incorporated on March 25, 1996 as ASTRAL POLY TECHNIK PRIVATE LIMITED. It was change into public limited company on 29 September, 2006.
Company is into manufacturing of Chlorinated Polyvinyl chloride (CPVC) and Polyvinyl chloride (PVC) piping and plumbing systems in India since 1999. The company has production facilities at Gujarat and Himachal Pradesh to manufacture plumbing system with diameter ranging from 0.5 inches to 8 inches.
APL has distribution network across the country with more than 200 distributor and 3000 retailers. Southern and Western India contributes around 75% of its total business.
APL has total installed capacity of 26000 TPA.     

INVESTMENT RATIONAL:
APL is the first licensee of Noveon, USA to manufacture and market CPVC Piping and plumbing system in India.
APL imports CPVC from Lubrizol, which is the leading manufacturer of this specialized polymer in the world.
Company’s raw material prices depends directly on the prices of crude oil. The sharp fall in the price in the past one year has increased the margin of the company.
70% of the demand for PVC pipes comes from the agriculture. Government spending on good irrigation and agriculture is definitely going to help the company.
Company’s client lists includes Hindalco, NTPC, EIL and many more.
Recently concluded expansion is going to add to the top line and bottom line of the company.
Company has diversified its portfolio into industrial piping, lead free PVC plumbing, ABS pressure pipes, CPVC aluminum bendable pipes.
Company is also looking for increasing the distribution network.
Company is also spending money on brand awareness of the brand ‘ASTRAL’.
Company has also procured the approval of NSF (National Sanitary Foundation) for its Flowgaurd product.
Company has entered into the overseas market. It has started exporting product to countries like Nepal, Bangladesh and Srilanka.

KEY RISKS:
Increase in the price of crude oil will eat into the margin of the company.
CPVC is not as tough as copper or steel.
Emergence of substitute of CPVC which have better quality than CPVC.
Any adverse movement of rupee will make the raw material cost to rise.
Himachal Pradesh unit tax benefit is only available till March 2010.
Slowdown in the economy will make the capacity underutilized.

SHAREHOLDING PATTERN:

FINANCIAL:

Key Highlights:
CAGR in Total Income is 42.87%.
CAGR in PBDITA is 53.2%.
CAGR in PAT is 55.1%.
KEY RATIOS:

Key Highlights:
EPS has grown from Rs 8.1 to Rs 19.5 at CAGR of 55.1%.
PBDITA margin has improved by around 250 basis points in the 2 year period.
NPM has improved by 165 basis period in 2 year period.
Interest cover is comfortable at 5.45, it remained almost flat in the 2 year period.

COMPARISION OF Q2FY2010 WITH Q2FY2009:

Key Highlights:
Total Income increased by 22.03% in the first quarter on YoY.
PBDITA increased by13.7% in the first quarter on YoY.
PAT declined by11% in the first quarter on YoY.

VALUATION&OUTLOOK:
At CMP of Rs 131 company stocks is trading at 6.8X, seeing the growth of the company we value the company at 10X. The fair value we arrive at is Rs 195.
The outlook of the company remains bright on back of good rural demand and the pickup in the real estate activity. The expansion of the company capacity will be reflected in the coming quarter results.

CONCLUSION:
 Investors with time horizon of at least 6 to 8 month could take position on the counter. The stock is fundamentally strong at this point and is poised for up move.

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